This Family Member Is the Key to Big Investment Gains
May 11th 2013 1:00PM
Updated May 11th 2013 10:10PM
The key to consistent long-term investment gains might seem elusive, but it's probably lurking under your roof right now. No, I'm not talking about charging your kids every time they raid the refrigerator or making your in-laws pay rent when they come out to visit.
Instead, your family pet -- be it a dog, cat, or even something as small as a fish -- could be your ticket to big investing gains.
You might think I'm nuts, or you may be completely against owning a pet, but, the results from a Harris Interactive poll last year are undeniable that pets are becoming deeply entrenched in American households.
According to the survey, which was conducted last year via an online survey of 2,634 adults, 91% of those who owned a pet considered that pet to be a part of the family -- up from 88% just five years prior. As such, many of these pets were entitled to certain perks, including the 67% of owners who admitted to letting their pet sleep in bed with them frequently or occasionally, the 61% who admitted to buying their pet a holiday present, and the 24% who admit to cooking specifically for their pet! I don't know about you, but I'd certainly love a quarter of my meals cooked for me!
The point here is simple, and especially easy to understand since I'm a pet owner myself: We will do whatever's necessary to ensure the health, well-being, and happiness of any of our family members. With greater than 60% of American households owning a pet, that represents a treasure trove of growing opportunity for investors.
Throw me a bone
There are a handful of different ways that you can approach investing in this space, in my opinion at least, so I'm not sure there's actually a wrong way among any of these ideas.
The most logical choice to invest in a burgeoning and ongoing domestication of our pets is by looking into pet superstores like PetSmart . While online companies like PetMed Express offer the convenience of ordering medications from the comfort of your home, pets -- like humans -- need personalized care that you usually just can't get from the click of a mouse. This means that PetSmart is bound to stay busy with physical store visits from consumers who want only the best for Fido or their feline. And the proof is certainly in the pudding --PetSmart hasn't delivered an annual revenue decline once over the past decade with total sales up 125% since 2004.
Another great way to take advantage of a growing relationship between pet and owner is through pharmaceutical and diagnostic companies that cater to pets.
Zoetis is a great example of a pharmaceutical play that would make a world of sense. The company's Slentrol is an anti-obesity pill approved in 2007 to treat chronic weight management issues in dogs. As I highlighted last month, a study by the Association of Pet Obesity Prevention estimates that some 80 million pets (about 55% of all pets) are currently overweight or obese. Slentrol, therefore, could be the perfect way to play this dangerous and growing obesity health risk. Not to mention that patents on pet drugs are generally meaningless since competition is often nonexistent. Most pharmaceutical companies won't invest the time to make pet biosimilars, which gives existing drugs a very long shelf life.
On the diagnostic side, there isn't a company better equipped to help veterinarians diagnose bone and organ disease, or help veterinarians improve the efficiency of their software, than IDEXX Laboratories . From small diagnostic analyzers to high-tech digital imagery and even consultation calls, IDEXX does it all for owners and veterinarians. The best part is that the company's companion diagnostics make up the bulk (83%) of its revenue, so the chance of IDEXX seeing a slowdown in demand appears pretty minimal.
Let's also not forget about the physical surgical and veterinary centers themselves. VCA Antech , for instance, operates more than 600 hospitals around the U.S., as well as 55 diagnostic laboratories. Like PetSmart, VCA hasn't seen a decline in revenue in any of the past 10 years, growing sales by 212% over that timespan thanks to growth in services rendered, ample pricing power, and strong ancillary sales of premium food and vitamins from its hospitals and veterinary centers.
Four paws of approval
As pet ownership increases in number, the above names should only be expected to see an increase in business and profits. Regardless if you're a pet owner yourself, the bond between pets and people is undeniably growing stronger, which should create a great investment opportunity over the long run.
Another great investing idea
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The article This Family Member Is the Key to Big Investment Gains originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool recommends PetSmart and VCA Antech. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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